I watched you on
C-SPAN's "Washington Journal" March 30, interviewed by Brian Lamb. You sounded
downright conservative — approaching Herbert Hoover, for goodness sakes — in
arguing that whenever a U.S. government bond is retired and not replaced by
another one, the liberated funds become available for more productive
investment. I hear you saying that budget deficits reduce economic growth
because the return on investment from bond finance of government spending is
lower than private spending. Did I hear right? Is this what you were taught at
Harvard? Is this a version of Keynesian economics that has not yet made it
into the Samuelson textbook?

What particularly amused me, Larry, was
the dark frown that crept over your visage when you thought of the
preposterous idea of selling bonds to finance a tax cut. You managed a look of
sheer disgust that anyone would be so reckless, even stupid, to do such a
thing. Yet this is the other leg of John Maynard Keynes, the one who would run
a deficit to finance higher government spending or higher individual spending
in order to produce a higher level of economic growth.

If public
finance means anything, Larry, it means the financing of investment in public
goods and services that will improve the commonweal. If a tax rate is higher
than it should be to produce a desired level of public goods, it makes eminent
sense to lower the rate as long as the higher level of production will produce
revenues that will pay the interest on the bonds. You told Brian Lamb and the
C-SPAN audience that the financing of a tax cut would be irresponsible. Do you
really believe this, or do you have to say so because it is a condition of
employment? Keynes in fact offered as his best guess that any income-tax rate
above 25% would be counterproductive, yet here we have a rate above 38% that
President Clinton put up on the advice of his economic team and which he later
apologized for having done. Do you think he should have
apologized?

Really, if you believe what you told Brian Lamb and the
C-SPAN audience, I predict a very short career for you in public service. You
are now living on the economic expansion engendered by the Reagan tax cuts and
the tax cuts forced upon the President by the 105th Congress. If you can think
of nothing better to do with the emerging surplus than pay down debt, you have
learned nothing from your Keynesian training or the supply-side revolution
that has passed before you. All that's left is Hoover.